Many of Iraq’s public employees reportedly have not received their July salaries as the country struggles to weather an ongoing oil export crisis caused by the continued closure of the Strait of Hormuz, according to Arab media reports this week.
Iraq spends approximately $6.5 billion a month on salaries, pensions and social welfare payments, according to the Finance Ministry. A senior ministry official told The National that “if the export disruption continues, we will not be able to pay salaries in time from now on.”
“We will pay whenever we have cash. Or those who got paid in time for July will be paid late for August,” the official said, adding that plans were being considered to see salaries paid out every 45 days.
Iraq’s oil exports plunged from 100 million barrels in February to around 32 million in May and June, according to figures shown to The National by the country’s Oil Ministry.
Iraq’s economy has already been battered by years of conflict. In recent years, however, conditions have improved, with the Multidimensional Poverty Index reporting that poverty fell from 23% to 17.5% over the past three years. The Borgen Project warned in April that the continued closure of the Strait of Hormuz could jeopardize that progress.
Iran strikes vessels despite promises of exemption for Iraqi ships
Though Iran has promised an exemption for Iraqi vessels transiting the strait, according to Al Jazeera, a number of vessels were targeted during the conflict. In mid-March, Iranian drone boats entered Iraqi waters and attacked the Marshall Islands-flagged Safesea Vishnu and the Malta-flagged Zefyros, which were both carrying fuel cargoes from Iraq.
Iraq’s economy remains heavily reliant on oil, which accounts for 90% of government revenue, 95% of export earnings, and more than 53% of the country’s gross domestic product (GDP). Although Baghdad has sought to mitigate the impact of the blockade, including through a one-year agreement with Turkey to maintain exports through the Iraq-Turkey pipeline, the country remains billions of dollars short because of the disruption to its oil exports.
"While our efforts continue toward a new long-term agreement for this pipeline... we have implemented this transit arrangement covering a daily capacity of 750,000 barrels," Turkish Energy Minister Alparslan Bayraktar said on X on Saturday.
In addition to renewing an agreement with Turkey, the US-funded Arabic media site Al Hurra reported on Tuesday that Iraq is offering discounts of nearly $30 a barrel on Basra crude, with sources saying there were hopes the price cuts could persuade potential buyers to accept the risk of sending tankers.
Asem Jihad, an oil expert and former spokesman for Iraq’s Oil Ministry, told the Middle East Broadcasting Networks, which operated Al Hurra, that the discounts “do not necessarily mean that Iraq has an oil surplus it is trying to dispose of,” but reflect the mounting risk and cost of doing business in the region.
According to Jihad, Iraq offered discounts of more than $30 a barrel on some Basra crude cargoes in May, though this reduction narrowed in July to around $14 to $19, before returning to $30 as concerns over tanker traffic renewed.
“This confirms that the size of the discount moves in line with the level of risk, not with the existence of a permanent production surplus,” he said.